Redefining Corporate Crime

0n August 10, 1978, three teenage girls driving in a Ford Pinto were hit from behind on Highway 33 in northern Indiana. Within moments their car burst into flames and Lyn Ulrich, 16 and her cousin Donna Ulrich, 18, were burned to death. Eight hours later, Lyn's 18-year-old sister, Judy, who had third degree burns over 95 percent of her body, also died.

When an Indiana grand jury looked into the accident a month later, they voted unanimously to indict not the driver of the van that had rear-ended the three girls, but Ford Motor Company - then the country's third largest industrial corporation - on three counts of reckless homicide. The automaker was accused of recklessly designing, manufacturing and marketing the Pinto's unsafe fuel tank system.

Although Ford was ultimately acquitted, the criminal prosecution of Ford Motor Company
reestablished an important precedent: In certain cases involving huyman health and safety,
corporations and their executives could be required to submit not only to the scrutiny and
sanctions of traditional federal agencies, but to state criminal courts as well.

Although the Ford case and its legacy have sparked intense debate over the past decade, the
idea of using criminal sanctions to deter corporate misbehavior is hardly new. Nearly a century
ago in the Shereman Antitrust Act, Congress used the threat of criminal penalties to check
the economic behavior of the emerging modern business corporation.

Today, as the public's awareness that the costs of corporate crime go far beyond economic
considerations has increased, so have the number of cases where corpoations are facing criminal
prosecution. In a national survey of 60,000 citizens who rated the seriousness of over 200 acts,
the Justic Department found that Americans "view purposeful dumping of hazardous waste as a
worse act than some homicides." And one recent survey showed that nearly 70 percent of the public
advocates prison terms for executives responsible for corporate offenses that have actual or
potential violent consequences.

The legal consequences of this change of consciousness are profound: Corporations and their executives that endanger the lives of employees - through unsafe workplaces, consumers - through dangerously defective products, or even communities - through illegally dumped toxic wastes, will increasingly face serious criminal charges - including homicide - in the state courts.

The recent increase in the use of criminal sanctions to protect public health and safety can be traced to a landmark 1975 case entitled U.S. v. Park, where the U.S. Supreme Court upheld the conviction of the chief executive officer of a large retail grocery store chain that had maintained rodent infested warehouses despite two warnings from the Food and Drug Administration (FDA). Even though the defendant had apparently instructed a subordinate to clear up the problem after each warning, the Supreme Court held that in such important matters of public health and safety, strict criminal liability could be justified. Although Park was a federal case, it sent a strong signal to business executives and prosecutors at all levels by lending the U.S. Supreme Court's approval to the use of criminal sanctions in corporate settings. "Then, and only then," in the words of Peter Jones, former chief counsel and member of the board of directors of Levi Strauss, "will busy executives feel enough pressure to devote the time, effort and resources necessary to prevent activities that seriously threaten public health."

Four years after the Supreme Court upheld the Park case, Ford was taken to court in the landmark Ford Pinto trial in Indiana. In the summer of 1985, the stakes were raised even higher when a Cook County, Illinois judge found three executives of Film Recovery Systems, a corporation that used cyanide to extract silver from used film, guilty of murder in the cyanide poisoning of a worker. The judge concluded that the employees were willfully deceived about the hazards of working with cyanide, supplied with virtually none of the safety equipment required by law and provided with a woefully inadequate ventilation system for the 140 vats of cyanide solution crowded into the warehouse. (Under the Reagan administration's new agency guidelines, OSHA had been barred from inspecting the plant prior to the tragedy.)

Tort v. Crime

Tort law and criminal law are often used to address the same or similar wrongdoings. For example, even though owning and operating a motor vehicle is a socially beneficial and encouraged activity regulated by administrative laws and the threat of civil suits, criminal laws are occasionally employed to deal with especially reckless and life-threatening behavior - behavior for which resort to a civil suit or regulatory fine is deemed insufficient. Cases like park, Ford Motor Co. and Film Recovery Systems appear to signify that an analogous development has taken place with regard to owning and operating a business.

Society now appears to be willing to support not only costly economic, but also morally symbolic criminal sanctions to deter businesses from endangering human life by transgressing acceptable boundaries of morality and risk.

"Some corporate behavior is seen now as just too objectionable to allow it to be purchased under a tax or civil penalty system," said University of Southern California law professor Christopher Stone, one of the leading corporate law experts in the country.

There are more cases of corporate homicide - not to mention other lesser offenses - currently pending in state courts than the cumulative number of those previously tried during our nation's history. The vast majority of homicide indictments that have been brought against corporate entities and/or individual executives involve workplace deaths. While the Film Recovery Systems case is not solely responsible for the rapid growth of occupationally related homicide prosecutions, it has received widespread publicity and clearly has shaped the legal strategy in many recent cases. The legal and business communities around the country are watching other important cases:

In 1986, two Austin, Texas companies -
Peabody Southwest Inc. and Sabine Consolidated Inc.
- and their officers were charged with criminally
negligent homicide in
connection with the deaths of three
workers who were buried alive in two
separate construction-trench cave-ins.
The prosecutors alleged reckless
disregard for on-the-job safety standards
on the part of contractor-owners. While
charges against one executive were
dismissed, another recently pleaded
guilty.

In 1985, the California Supreme
Court refused to overturn the in
voluntary manslaughter indictments of
movie director John Landis and four
other defendants. The charges stemmed
from the 1982 deaths of actor Vic
Morrow and two children during the
filming of "Twilight Zone: The Movie."
Prosecutors claim that extreme
negligence during filming of a late-night
scene led to a disastrous helicopter
accident. If convicted the defendants could face two to six years in jail.

After the death of a worker who had suffocated while digging an elevator
shaft, Maggio Drilling Inc. and its president were charged in 1984 with
involuntary felonymanslaughter in Los Angeles. The district attorney
alleged that the company failed to shore up the trench, provide a safety
harness, and monitor the air in the underground shaft. The corporate president
recently pleaded no contest to the manslaughter charge.

In 1984, General Dynamics Corporation was charged
with involuntary manslaughter and criminal violations of state
occupational standards in the death of a worker exposed to
fluorocarbon solvent vapors at its military tank plant in Center
Line, Michigan. A state court dismissed the charges, citing the worker's
"hypersensitivity" to the solvent, but the Michigan Attorney General's
office is appealing the decision.

Seven construction workers were killed in a 1981 accident at a power plant project near Fresno, California. After being presented with evidence regarding lax safety standards on the site, a grand jury indicted the Granite Construction Company for manslaughter. The firm sought to dismiss the indictment on the grounds that a corporation could not be charged with homicide, but a court of appeals rejected this claim and upheld the indictment.

In New York, Warner
Lambert Company and several of its officials were indicted for second-degree manslaughter and criminally negligent homicide
after a 1976 explosion in the company's gum-making plant
killed six workers. The prosecution alleged that the blast could
be traced to the failure of officials to install an adequate
exhaust system. Although it did not disallow the possibility of
such a prosecution under different circumstances, an appellate
court dismissed the indictment, stating that the actual cause of
the explosion had been unforeseeable.

Remarkably in the so-called conservative, Reaganomic
1980s, state's attorneys are fighting significant obstacles to
bring the criminal law to bear against corporations under
circumstances that just a few years ago would have resulted in
only a regulatory action, worker's compensation claims, or a
private civil suit.

"Both the public and prosecutors are beginning to realize
that some accidents on the job can be equally outrageous as
someone who hits a guy over the head and takes his wallet,"
says Ann Singleton, a Maryland prosecutor who responded to a
fatal highway accident by filing involuntary manslaughter
charges against a truck leasing firm owner that allegedly
refused to maintain his fleet's brakes.

Virtually every survey on corporate and white collar crime
indicates heightened public concern over not only the
incidence, but the seriousness of corporate crime. The public's
perceptions of what constitutes "acceptable risk" in daily life is
also changing, especially as people become more aware of
such things as the short- and long-term dangers of toxic
chemicals in workplaces and communities.

Finally, some observers, like Russell Mokhiber, editor of the
Corporate Crime Reporter, believe that state prosecutions
of corporations for health and safety violations are responses to
a decrease in watchfulness by the traditional federal regulatory agencies.

"It's a reaction to diminished federal civil regulation," said Mokhiber, "local district attorneys are just getting fed up and starting to prosecute."

Beginning in 1981, as one agency spokesperson noted, OSHA stressed "cooperation toward manufacturers rather than an adversarial role." In the last four years, the number of OSHA inspectors decreased by 17 percent; both the number of complaints investigated and the amount of fines for violating safety standards declined by 44 percent. In 1985, the U.S. Labor Department reported alarming statistics: work-related deaths had jumped 17 percent in 1984, while occupational injuries and illnesses had increased 11 percent.

Although it is risky to claim a direct link between weakened
regulatory controls and increased death and injury in the
workplace, prosecutors have not been reluctant to make this
connection and to cite it as justification for criminally
sanctioning corporate offenders.

"The more I looked into this, the madder I got," said Jay
Magnuson, the prosecutor in the Film Recovery Systems case.
"I felt that if OSHA had taken a look at that plant, Stephan
Golab might still be alive. We stepped in because nobody else
would do it."

There is no single source of incentives or disincentives -
whether provided by the marketplace, government regulations,
civil suits, or criminal prosecutions - that can minimize the
economic, social, and physical costs of businesses that violate
the law. It takes a strong combination of these countervailing
forces to both redress and deter such misbehavior. Even Japan,
this country's most formidable trade competitor, has sanctioned
the use of criminal penalties against its wayward corporations.

Criminal prosecutions of corporations are neither a
preferred approach to matters that can be addressed adequately
by private civil suits, nor a substitute for the rigorous
enforcement of regulatory provisions under OSHA or the EPA.
Such criminal prosecutions have simply redefined business
misbehavior that threatens human health and safety: What was
once labeled "just bad business" may now be considered a
criminal act.

William Maakestad is legal counsel and associate professor of management at Western
Illinois University. He is co-author of the book, Corporate Crime Under Attack: The Ford
Pinto Case and Beyond, published earlier this year by Anderson Publishing Company.